Oregon enacts tax credit law to boost formation of de novo banks

Oregon enacted a law to encourage the creation of new state-chartered banks.

The state has signed into law House Bill 4052, which offers up to $1 million annually in tax credits for three years to newly chartered banks that begin operations between Jan. 1, 2027, and Dec. 31, 2032.

House Bill 4052 amends existing Oregon tax statutes, ORS 314.772 and ORS 318.031, to incorporate the new credit. To qualify for the tax credit, a bank must obtain a charter under ORS chapter 707 and a certificate of authority from the Oregon Department of Consumer and Business Services.

The credit cannot exceed the bank's tax liability for that year. Unused credits can be carried forward for up to three years.

The bill will help spur the creation of new community banks by "helping offset the significant startup costs associated with organizing a new bank," the Oregon Bankers Association said in an April 28 release.

The Department of Consumer and Business Services will establish rules to verify eligibility and will coordinate with the Department of Revenue. Banks need to secure their charter and certificate of authority before claiming the credit.

The bill was first introduced in the Oregon House of Representatives in February, then moved to the Oregon State Senate, and was signed into law by Governor Tina Kotek on March 31. It will become effective on June 5.

The goal is to stimulate banking startup activity after nearly two decades without new bank charters in the state. Seaside, Oregon-based Clatsop Community Bank was the last de novo bank to open in the state in 2008. Lewis & Clark Bancorp acquired Clatsop in 2019.

Currently, 12 commercial and savings banks are headquartered in Oregon, and the most recent was established in 2004, according to S&P Global Market Intelligence data.